i will see you money! good evening, everyone. i'm larry kudlow. this is "the kudlow report." so today at the white house it was all peaches and cream and conciliation. nothing done, mind you, but perhaps we're on the right path. the markets did seem to like it. i want to ask this question. where's the balance? i see tax revenue increases, but i don't see spending cuts, and that's not going to be good for our economy. so the question is now another topic. will israel launch a major ground operation to wipe out hamas? the israelis did take out another top hamas leader today. not long after, air raid sirens went off in jerusalem, and egypt sends its prime minister to the gaza strip in a show of solidarity with the -- and did general petraeus pull a 180

degree turn in testimony today? in september he said it was videos and spontaneous demonstrations. today he said the cia knew all along it was a terrorist attack in libya. this story gets worse and worse, more and more complicated and we are going to parse through it. first up, with the fiscal cliff only 45 short days away, are we facing a stalemate or is there a new kissy huggy era coming to washington, d.c.? we've got two kissy huggy cnbc contributors. jared bernstein, former vice president, biden chief economist, and kissy huggy jim pethokoukis of the american enterprise institute. jimmy p., i love this new washington picture. and i don't want to be pessimistic. i want to be optimistic. maybe they can make a deal. but here's what i worry about, jimmy. here's what i fear. the republicans are conceding that they'll give a revenue -- a tax revenue portion by limiting deductions. but i don't see any spending cuts. the sequester has been called

off. mr. boehner would like a down payment on entitlements. i don't see that happening. to me remember it used to be 3-1 or 4-1 spending cuts to revenue increases. right now it looks to me like it's 10-1. 10-0. $10 of revenue hikes and no spending cuts, jimmy pethokoukis. >> i think what we're going to get at the end of the day, you're going to get a lot of tax increases, and then you're going to get a lot of promises about caps and mechanisms. be careful of the word "process." there's going to be a process in place for looking at further spending cuts. or entitlement reform. but that's all going to be like tomorrow, the day after tomorrow, the 12th of never. what we're going to get right away are tax increases in an economy that's going to be really slow. it was slow last year, slow before. the economic reports out today, terrible. and we're going to try a little experiment about raising taxes in a lousy economy. hop it works. >> jared, jimmy's got a point. the industrial production

number, no matter how you slice it, with the hurricane or without the hurricane, was a lousy number. business equipment continues to fall. that whole capital goods sector is in freefall right now. so yeah, great, no spending cuts. lots of tax revenues. your man wants 1.6 trillion over the next ten years. i don't see how this works out. >> let me explain how it works because jimmy was not being nearly kissy and huggy enough. look, what people have to understand and appreciate, i don't know why this hasn't gotten more play. maybe the white house itself needs to do a better job here. the congress and the president have already cut $1.5 trillion of spending over the next ten years. 1.7 trillion if you add interest savings. now, bowles simpson which i think you and jimmy like a lot, calls for 3 trillion in spending cuts. we are halfiway there. this is not a promise for later. and it did come through the budget control act and other discretionary caps, p but it's

real. it's on the books. what we haven't done yet is add any new real revenue -- and it's a good thing -- >> jimmy pethokoukis. >> can i correct jared? first of all, listen, we had, what, about $500 billion of interest expense. you know, you're not reforming government by doing that. you're talking about a trillion dollars in war savings? >> no, no. be war savings. >> that's phone any numbers. right now i'm at 1.6. so let's just stick with your 1.7. we've got your 1.7. then you've got 1.6 of tax increases. that's not how you do fiscal consolidation. the way you do fiscal consolidation, also the way bill clinton did, was heavy on the spending cuts, lighter on the tax increases. this is an eu style tax hike-heavy austerity and we may get the same results. >> you are not rising above, jimmy. i've got to tell you. >> i'm rising into the truth. >> no. the 1.7 trillion in spending cuts already on the books does not include war savings. you're right to bring that up, but that's not in there. >> i didn't say it did.

>> i thought you said it did. it does not include war savings. and there is absolutely nothing to worry about -- >> what does it include? >> let me finish. jimmy. >> no, it's larry. it's huggy -- >> the expiration of the top two tax cuts does not -- >> no, it's huggy kissy larry. >> thank you, larry. >> i'm trying to figure out where this trillion-dollar spending cut is coming from. because the wartime stuff has already been counted. the 1.2 trillion that was in this budget control act is off the table. they're ending sequestration. they're ending the automatic cuts. it's gone. it's history. so look. i hope boehner can pull a rabbit out of the hat and not raise tax rates, which includes income taxes, capital gains taxes, dividends taxes, and any other bloody tax. i hope he can. but if he's going to give up to cap deductions, if he's going to give up a trillion or $1.3 trillion of new revenues over ten years, i want to know what

you get for it because my book, my book, jared, is you don't even go to the revenue side until you have milked and squeezed down every spending cut possible, including entitlements and the democrats don't want to touch entitlements. >> first of all, i don't think that's a very balanced approach. and secondly -- and even republicans now, mcconnell, boehner, are talking about more balance. and secondly, i agree with you guys on entitlements. they will be on the table. medicare. medicaid. i don't know about social security. >> where? which table? >> on the table that -- on the deal that is hopefully ultimately going to come out of this. >> this is the kissy huggy table. jimmy pethokoukis, this is the kissy huggy, louis cannes table. it's an antique table. what i want to know is what the hell's going to be on that antique table. >> i think what the president is trying to create is a -- you talk about the fiscal cliff. this is kind of like a tax hike straitjacket where he wants to raise tax rates and also get rid of tax breaks so the rich people can't wriggle out of those tax hikes by moving money or

shifting it overseas or to different kinds of investments. that's what he wants. >> what's wrong with that? >> well, hikes, that's going to be bad for growth. that's why. >> tell me, jimmy, how is it you know more than the congressional budget office on this point? i mean, their analysts, non-partisan, they told us that the expiration of the top two tax cuts would shave .1% off the gdp. >> actually, what they said, it would knock off a quarter point on a static analysis basis from an economy growing about 1 1/2%. may grow 1% in the fourth quarter. >> 1/10 of 1%. >> the cbo does not understand supply side economics. but i've got to get out of here. jared bernstein, thank you. jimmy pethokoukis, thanks vecry much, gentlemen. the executives said yes. the white-collar workers said yes. even the teamsters said yes. but the bakers union said no to a deal to keep hostess alive. what was that union thinking when it decided to play chicken

with 18,500 jobs and then lose? in the next half hour i'm going to ask that union leader that question live on this program. and you don't want to miss it. now, let's do some stock market work following on our discussion about the fiscal cliff, how do investors play this ball game. here now is our pal done luskin, trend macro chief investment officer. you know, don, i'll start with you. i know you've got a million scenarios. but if it's all tax increases and no spending cuts, it just kind of makes me wonder how this can be good for stocks and the economy. >> it can't be good for the economy. look, for one thing, you raise taxes, it's not going to be good for the economy. i don't care what the so-called non-partisan congressional budget office says. that's ridiculous. any idiot knows you raise taxes, you retard economic growth. period. paragraph. as far as the spending cuts, they're not on the table. what have we heard from obama

about spending cuts? we've heard that he wants to lower the cost of health care. what does that mean? obama care 2? does that mean just paying medicare and medicaid providers less? let's put entitlement cuts on the table, like they were on the table in july and august of 2011, when boehner and obama almost had a deal. let's just go back there. that's what boehner wants to do. what boehner said the day after the zbl the -- >> no, let me pick you up on that. that would be very bullish. i happen to totally agree with you. and that's exactly what speaker john boehner wants to do. that is precisely what he wants to do. essentially have tax reform and have entitlement reform and have it laid out so it it all gets done next year. this year is the down payment. >> that's right. >> now, don, is it too early, though, to make a bet on any of this? that's really what i'm asking. between now and year end, when the bush tax cuts expire at year end, what's a stock market investor to do? you're going to go up, you're

going to go down. you saw today you had a is 00-point swing. but that's no way to be invested. what is your advice on how investors play this fiscal debate? >> i understand the sentiment that the wise thing to do is to take a long-term perspective. but every once in a while we experienced this in the summer of 2008. we're experiencing it again now. every once in a while a short-term event happens that is so consequential you really need to take it into account. larry, one thing we know for sure, no matter where we end up on december 31st we're going to go to the brink to get there, and the decline in stocks that began mid september, we've already got a down payment. 8 1/2% drop in the s&p. there's going to be another 15% at least just from the horror show of watching these monkeys go to the brink with each other. and then when they get to the brink, maybe they fall off, maybe they don't. either way we're going to be in a bear market by year end. and if they do fall off we're in another great recession. >> but this could be a great bear market. in other words, i have this reverse spin theory.

if the stock market vigilantes do exactly what you're saying and they knock the market down another, i don't know what you said, 10% or 15% off of what we've done. >> yep. >> that would scare the heck out of these politicians in washington. scare the heck out of them. and that might be the best possible thing to create a freshl new bull market later. what do you think of that? scare them, be vigilantes, and maybe we'll get something good out of this. >> i would like to believe that. but there's one possibility that thwarts that idea. you're assuming that these people don't want to create a recession. remember rahm emanuel's doctrine? never let a serious crisis go to waste. the thing that's wrong with obama's second term is they don't have a crisis. and sometimes i think they want to make one. lints to what people like patty murray and christina romer are saying. what barack obama said at that press conference when he said if there was any scenario in which we could fall off a fiscal cliff. he said sure, we could imagine that scenario, if congress doesn't agree. agree with whom? with him. he's saying it's my way off the cliff. and that is a way to go off the

fiscal cliff, blame the republicans, stampede them into god knows what. cap and trade, card check. another stimulus plan. that ain't no bull market, larry. >> i think all those fears are actually now slowly being discounted in the stock market. and i agree with you. >> more to come. >> president obama answered that question all wrong because he kind of left the door open that maybe he'd let the cliff go through. anyway, don luskin, thank you very much. >> thank you, larry. >> rockets continue to rain on israel. another hamas leader is taken out. >> thank you. >> is it time to take the shackles off and let israel just finish the job? and folks, don't forget, free market capitalism, it is the best path to prosperity. but i've got to tell you, you've got to have limited government and you've got to have spending cuts to make this free market model work. i'm larry kudlow. we'll be right back.

this is war. nbc's martin fletcher is in tel aviv with the latest. good evening, martin. >> reporter: israel's security cabinet met this evening. on the agenda a discussion about escalating the operation in gaza

and also the possibility of a ground invasion. they were challenged even more today by hamas. for the first time jerusalem, israel's capital, came under attack from rockets from gaza. two rockets fired. they fell harmlessly outside the town. tel aviv, israel's largest city, also attacked from gaza for the second time in two days. rockets fell harmlessly, one in the city. now, it's extraordinary that hamas is still able to mount this kind of challenge to israel after these three days of intensive air attacks by israel aimed at knocking out the hamas capability. that raises the question of what israel will do to stop the hamas rockets. and the main question is will there be a ground invasion. the army's poised on the edge of gaza. 16,000 army reserveists have reported for duty today to their units. and the security cabinet this evening ordered that 75,000 more israeli army soldiers, reserveists, could be called up. an indication that an attack against gaza is certainly very

possible. now back to you. >> all right. many thanks to nbc's martin fletcher. so i want to know, can israel just wipe out hamas? and once for all. let's get right to it. our special guest this evening is mark ginsburg. he's the former u.s. ambassador to morocco. mark, welcome back to the show. look, i'm probably naive. but 16,000 reserves have been called up. maybe another 70,000 on the way. a ground war may start. can the israeli defense forces just take out the hamas forces? can they just take them out, martin? >> well, they can. and the fact of the matter is that they failed to do so in 2008 because of international pressure over civilian casualties. and that's of course the dilemma. but the fact of the matter is, larry, that we're seeing once and for all why we cannot let iran get a nuclear weapon. because hamas has been able to get these missiles from iran. and what's going to stop them if they're firing missiles at jerusalem today, what's going to stop them from firing a nuclear

missile at israel tomorrow? that's why israel has to act authoritatively, finally, once and for all against the hamas military and civilian leadership. >> and stay on the ground for a while longer. in other words, not pull out. what i'm asking you i guess is just a basic military strategy issue. will they continue until they get the job done? the international community will scream bloody murder. although legally israel is in its own self-defense and has all the rights in the world. i'm not so sure about the usa. we'll get to that in a minute. but what i want to ask you is do you think the idf will stay on the ground and really get the job done? >> no. and i'll tell you why. because there's bigger fish to fry for israel right now with the patron saint of hamas, which is the muslim brotherhood in egypt and the egyptian-israeli peace treaty. you have to understand, larry, that as much as you and i are in agreement here it is very doubtful that israel is going to invade gaza militarily because that could very well provoke some military confrontation with egypt.

that's the last thing that the israelis want to see happen. and it's the first thing that hamas wants to see happen. >> now, this goes very importantly to president obama's foreign policy. so he's on the phone with morsy, the head of the muslim brotherhood, also the head of egypt, and he's also on the phone with netanyahu. but i don't get this. at some point don't we the united states have to say to israel go on ahead, these are terrorists, these are guys attacking jerusalem and tel aviv, and we give you a green light to do that? don't we have to say that if obama believes what he actually said during the recent political campaign? >> well, i agree with that. of course the administration wants to have it both ways because that's the nature of diplomacy. it's going to let the israelis get a green light here, but they're going to then stop the israelis from doing what essentially is to finish the job. after all, hamas is the equivalent of the khani network.

if it works for the united states to use drones and to attack the terrorists that are attacking the american troops, what's good for the goose is good for the gander here. larry, but at the same time you know the game. the administration is going to recognize that the egyptians are going to be placed in a position of having to do something if the israelis do invade, and the americans have a strategic interest, as of course the israelis do, of preserving the egyptian-israeli peace treaty. and that's -- >> but the israeli forces can bottle up gaza and stop egyptian weapons from getting through. they can do that, can they someone. >> yeah, well, that's the problem, of course, is that the sinai peninsula has become hamas's failed state, imperi imperialistic territory, where the iranians are being able to smuggle weapons in to hamas. it's going to take an effort to in effect quarantine the entire sinai peninsula once and for all. we're not talking about a difficult job. it's going to require the egyptians and the israelis to cooperate because it is after all egyptian territory from where these missiles are coming

from, larry. >> all right. but let me go back to one other thing. are you saying -- you've been in the foreign service. you've been an ambassador. you're saying that president obama will really not take a side here? he will not take a position here? i have not heard him on the subject of hamas. he has criticized them. but i haven't heard him really bear down, it's a terrorist thug group. and do you think that he doesn't get the egyptians that are playing footsie with hamas? the egyptian prime minister, the number two guy was in gaza today with the prime minister of hamas, or whatever he's called. do you think obama doesn't get that? you really think he's going to try to play both sides against the middle? >> no, i -- look, he does get it. he talked to the israeli prime minister. i have confidence that the americans understand that israel cannot tolerate these types of missile attacks. and for all intents and purposes i suspect that the administration gave the israelis a green light. but of course they're concerned, as the israelis are, over what

may happen if they in effect cause the egyptians to act against them. and that's the red line that no one understands yet. what may happen if the israelis march in with significant military force on the ground. and you and i are afraid to -- they don't know the answer at we will see. anyway, ambassador mark ginsb g ginsberg, thank you very much for walking us through all of that. now, how's this for a great deal? listen to this. the government gives you $249 million. you go under. but then the government gives you another million just anyway while you go under. can you say tone deaf? we'll come right back to that later on. [ male announcer ] how do you trade? with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor, right at your fingertips.

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our economy is not creating middle-class jobs, and our people are increasingly unprepared to fill the middle-class jobs that are being created. and so we need to have an answer to that. we need to show how limited government and free enterprise principles can turn that around. and if we do i think we'll be successful. >> all right. that's senator marco rubio saying really the same thick we always say "the kudlow report," free market ideals are for everybody. it's time for the gop to reach out to minorities and immigrants with that very message. and that's the topic in tonight's free market friday panel that's coming at you in about 20 minutes. now, here's one for you. one of president obama's pet green projects, a-123 systems, had already gotten 249 million

bucks in stimulus money. to no one's surprise the company went bankrupt. but now we find out the department of energy gave the company another million the very same day it went belly up. what is up with this? some kind of consolation prize? cnbc's own eamon javers has more. good evening, eamon. >> good evening, larry. more information about the batterymaker a-123. it's a company that's been at the center of the fire storm over whether the government should provide grants and loans tone ji company. senator chuck grassley putting out new information stayed. grassley a republican in washington says saying that a123 received a grant from the federal government, the department of energy, on the same day that it filed for bankruptcy. grassley releasing this information in a letter from the company to the senator. we skpd the department of energy about this. here's what they said. they said the energy department takes its responsibility to be good stewards of the taxpayers' money very seriously. funds are only disbursed to a

company for work already completed toward the ultimate goal of the department's grant. and larry, i should say that this was a grant for work that had already been completed. the invoice following the work and the payment following that. so the work had been done well in advance of the bankruptcy date but nonetheless awkward politically at least that the check arrived on the same day the company went bankrupt. >> many thanks to eamon javers. general david petraeus testifying for congress now says he knew almost immediately that the september 11th attack on benghazi was a terrorist attack. but that is a 180 degree flip-flop turn of his prior testimony back on september 14th. why is this? americans believe they should be in charge of their own future.

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welcome back to "the kudlow report." i'm larry kudlow. in this half hour, the striking bakers union just put hostess out of business and into liquidation. that's causing 18,500 workers to lose their jobs.

it is the height of union arrogance and stupidity. we actually have a top bakers union leader to try and defend his indefensible position. plus, message or mechanics? that was the debate at the republican governors associn. hint, they came up with the wrong answer. now we will debate that 37. and former cia director general david petraeus told the house and senate intelligence committees today that his agency knew almost immediately that al qaeda was behind the benghazi consulate attack. however, that's 180 degree about-face from what he said before. nbc's own steve handelsman has more. >> reporter: larry, thanks. good evening. general petraeus got a warm welcome up here on capitol hill from lawmakers clearly sorry to see him go. the former cia director testified the u.s. intelligence knew islamic militants were a threat in benghazi and specified soon after the september 11th attack in so-called talking points to be used with the

public that al qaeda-type organizations were responsible for the attack. but as those talking points made the rounds of other national security organizations here in washington, the word al qaeda got changed to "extremists." and when the points got to u.n. ambassador susan rice, she made no mention of al qaeda or extremists when she went on nbc's "meet the press" five days after the attack. rice did tout the anti-terrorist accomplishments of president obama. pet rae ugs denies any political pressure on the cia to scrub al qaeda from its talking points. new york republican peter king said today, "we need to find out who did the scrubbing and why." larry, back to you. >> many thanks, steve handelsman, appreciate it. so why has general petraeus done a 180 on benghazi? this is a very serious issue. first he blames the attack on a video. now he's saying it was a terrorist attack and the briefing notes were changed. something doesn't add up. here now is michael rubin, resident scholar at the american

enterprise institute, and alexis levinson, reporter at the daily quarter. michael, i'll go to you first. peter king himself today, i guess i'll quote this, he said that the testimony petraeus gave today, that they knew immediately it was a terrorist attack, differed with his own briefing to lawmakers on september 14th. sources say that petraeus somehow has chaud hnged his position. now, i don't get this. before i even get to the talking points, michael, how can petraeus say one thing on september 14th and then come back today and say no, no, no, here's what really happened, we knew about it all the time? >> you know, larry, that's an excellent question. but this is what really gets me. president obama, when he was a senator, first campaigning for office, came up with all these wild conspiracies about the politicization of intelligence. you would think there would be a firewall in place to prevent the politiization of intelligence.

and the fact that general petraeus was allowing the cia's talking points to be circulated to political appointees in non-intelligence-related departments is deeply problematic to start with. >> okay. i get that. but alexis, i'm not yet satisfied because -- you were in the hearing today as i understand it. >> i was not actually in the hearing. i was outside. it was a closed hearing. >> all right. it was a closed hearing. but peter king said that basically today's testimony disagreed with his testimony on september 14th. and petraeus -- and i've actually heard him say this on various tv shows. he was quoted as saying the problem here was this terrible muslim -- anti-muslim video and that it was a spontaneous demonstration that somehow turned out wrong. now he's saying we knew all the time. alexis, somebody's got to clear this up. he is contradicting himself. and if you ask me, even though petraeus is a great man who made a great mistake in his personal life, this is more important. is he changing his view?

was there political pressure on him? what do you make of this? >> you know, i've heard a couple different things over the course of the day. one of them was that they were initially reacting to what information they had and that information was improved on. which obviously, if he knew it was a terrorist attack from the start is probably not quite true. and the other thing i've heard -- >> wait, wait. stop right there. not quite true. that's an important point you just made. he's saying now they knew immediately. you're saying that probably was not quite true. >> no, no, no. >> your position is more sensible than his position because it did take them 24 hours or some such to get this information. >> right. and the other thing is there is some disagreement between lawmakers whether he did actually change his position between the first hearing and the hearing today. king came out and said that. other lawmakers came out of that hearing and said no, no, he reinforced actually what he had said on the hearing a couple days after. and he reinforced the idea that it was a terrorist attack. >> all right. michael roobin, let me go back to the internal process.

i worked in the white house for many years under reagan. talking points do get circulated. but i'm going to assume, michael, that cia talking points go through the national security council. do you think the national security council were the people that changed these talk points and that's what essentially stiffed the u.n. ambassador susan rice? >> well, one thing we've seen in this administration is within the national security council when it comes to the most sensitive issues oftentimes it's the political advisers who are taking control rather than the national security professionals. and ultimately, this may be the root of the problem. we see this with the allegations that valerie jarrett is in charge, for example, of the alleged iran talks. and if this is going on at other levels in the national security council it represents a real true problem. and frankly a threat to our national security. >> you think that president obama ever got wind of this? in other words, i kind of hear this stuff and i'm thinking to

myself, the president's only as good as the information he's getting. and if these talking points got diluted, he's in a meeting with leon panetta and a couple other people, vice president biden, maybe obama didn't know. maybe he really didn't know. >> well, you know, the responsibility of the commander in chief, if he doesn't know, if he has a question about what's put in front of him, is to pick up the phone and call david petraeus. that should have been the first call he made. one of the questions i would have is whether such a call was ever placed. >> alexis, how far did they get in this hearing? is petraeus off the hook now, or will he be summoned, perhaps under oath, perhaps not, into other hearings? >> lawmakers came out and said they definitely had more questions. saxby chambliss, who is the vice chair of the committee, came out and said one of the pig questions still remaining was how did these people get into the embassy and how -- how did this all start, why was there

such a -- why did security allow this? and so i think they're going to have several more hearings. and i don't know if petraeus will be at them but the other intelligence officials definitely will. >> did you hear any whisperings at all that general petraeus may well have been compromised regarding his personal problems? that's how i'm going to describe them. his personal problems. and therefore, therefore maybe did change the story from september 14th to now. is there any whis pergz of that? is anybody talking about that? >> so no. that was the one thing that members of congress came out of the hearing very c on. the affair was brought up once. it was brought up in the very beginning of the house hearing. and he said no, it did not in any way compromise the intelligence or affect benghazi at all. and the subject was then dropped after that. >> all right. i'm going to leave it there. thank you very, very much to both of you. james rubin, alexis levinson, appreciate it. late this afternoon a federal

judge ordered an injunction in favor of a christian publishing company in a diput with the government over the birth control mandate and obama care. the tindale company does not want to cover plan b and iud contraceptives which may prevent a fertilized egg from attaching to the uterus. tindale views mows methods as not morally different from abortion. and the judge agreed, saying that the law compelled the plaintiffs to violate their beliefs. this of course a religious freedom issue. thanks very much to michael rubin and alexis levinson for helping us out. now, folks, let's slip back to the twinkie. the twinkie is a goner. hostess has reached the end of the line thanks to a labor walkout. now, last night i asked the ceo of the union's arrogance, it's going to cost more than 18,000 people their jobs. here's what he said. >> i would think that they would have to know it. you know, whether they believe it or not, i don't know. >> all right. i'm going to ask the vice president of the bakers union if he believes it now. that's the best we can do.

ds. and she became the full time mother of three. it was soccer, and ballet, and cheerleading, and baseball. those years were crazy. so, as we go into this next phase, you know, a big part of it for us is that there isn't anything on the schedule.

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when you take a closer look... ...at the best schools in the world... ...you see they all have something very interesting in common. they have teachers... ...with a deeper knowledge of their subjects. as a result, their students achieve at a higher level. let's develop more stars in education. let's invest in our teachers... ...so they can inspire our students. let's solve this. an old american classic bites the dust over a bakers union strike. hostess brand is closed. no more twinkies, ding-dongs, ho-hos, or jobs. that's the key. take a look at my interview last night with the hostess ceo. >> so what roughly, tell me if i'm wrong, 5,500 bakers lose their job or is it the whole

18,000? >> all 18,500. >> and they know this, do they not? they know this? they'd rather have no job, taking the same concessions that the teamsters took rather than a job? they know this? >> i would think that they would have to know it. you know, whether they believe it or not, i don't know. >> all right. well, let's go straight to the source. joining me now on the phone in philadelphia is mr. robert oakley. he is the vice president of the bakers union. mr. oakley, we appreciate your coming on very much. but i want to ask you, sir, the walkout by the bakers union may wind up in all likelihood costing 18,500 job losses, not to speak of the impact on the family. how can you do this? i don't understand it. >> well, you know, it's the way -- you're saying that that's caused by the walkout. these people are not outside because they want to be outside. they're in a situation -- this took a long time for this to

happen. in the last five years -- none of which have any experience in the baking business. >> but mr. oakley, i want to ask you, did you not know, did you not know that hostess has been in bankruptcy and therefore in dire trouble? >> sure. sure. we were going through the numbers. again, they made these concessions back in '04. and when they did that, they were concerned about their jobs and they told the company, we give you this money, this should hopefully give us a future, and the company said, well, we'll put it back into the company. but they didn't. >> but they offered an equity position for your people. i mean, i want to ask you, the teamsters union took the same

vote on the same wage and benefit concessions and they passed it. now, did you not know that? and was not the handwriting on the wall that that's all you're going to get? >> yes, our people knew that. and you say the same concessions. some of the concessions were different. and the vote was done differently. the vote of the teamsters union was done on a mail-in ballot through the international union. and that vote was within a couple hundred votes. it was 2,000 and something to 2,000 and a few votes. and that was delivered back to the membership. you have a very divided membership on this. this is not what people are trying to describe here. and you know, these people are not crossing the picket line as it's being described. some of these trucks even in philadelphia could be taken to remote locations because the teamsters have -- >> all right. it may be split. but they made the vote. the point is when you and your

union say you just didn't know this was coming, what i'm saying is the company was in bankruptcy. the teamsters had the same situation with basically the same or similar concessions. i mean, do you, sir, and your other officers, do you know how to read a profit and loss income statement? could you not see the dire straits that hostess was in? did you not know they were in bankruptcy and therefore, couldn't you figure out that if you walk out the whole thing's going to go into liquidation and all your people are going to lose the jobs? i mean, it's like day follows night. >> no. no. it's not the way you're describing it. we didn't have all the information. you know, some of the information we had, we felt there were other solutions to it than filing for liquidation. this is -- again, there's a lot of these that are very profitable. and that's why you're already seeing people that have interest in buying this company and some

of the brands. because it's just a problem of mismanagement there. you know, our people when they voted, you've got to bear in mind this was done by a secret ballot and it was done locally. not through the international union. these votes were conducted locally. and the results of that was forwarded to the international union. >> all right. we're going to leave it there. mr. oakley, i appreciate your time, sir. i appreciate you coming on. i know you're very busy. we do have some news on this just in. there is indeed some interest in the hostess company. darren metropolis, who is the co-ceo and co-owner of the pabst brewing company says he finds the possibility of hostess even more attractive now that the unions may no longer be a complica complication. that just in from the chief of pabst brewing, a private company. i don't know if they want to buy part of it or some of the products or not. but the whole point is, again, these union guys are not going to benefit from that kind of takeover. they are still going to be out of luck because in my opinion

they made terrible decisions, couldn't read the handwriting on the wall, and the union families are going to suffer. you ought to think about that as far as the unions are concerned. now, up next on "kudlow," the republican governors association met this week in order to lick their wounds, but did they really learn anything? we're going to debate that with the free market friday panel, coming up next. a business pro. monarch of marketing analysis. with the ability to improve roi through seo all by cob. and you...rent from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above, and still pay the mid-size price. i'm going b-i-g. [ male announcer ] good choice business pro. good choice. go national. go like a pro.

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when i see republicans speak before black audiences often he this say how they used to march with martin luther king or their dad marched with martin luther king. they don't talk about issues, economics, the fact that when you raise taxes you actually create situations where there's fewer jobs. >> all right. you just heard noted radio talk show host larry elder. that was from earlier this week right here on "the kudlow report," with his take on where the gop must begin to reconstitute its message. but some republicans are resisting the call for a message overhaul. and i'm not sure i get it. why are they resisting? let's talk a little bit with our panel. igor volsky. he's our deputy editor of thinkprogress.com. others our democrat. mark simone, wnbc radio talk show host. phil musser, former executive director of the republican governors association. where this debate took place. okay. i want to go to phil musser first. you know, i hear about election -- you know, election mechanics and the ground game.

i know that stuff is important. and i understand there might have been some flaws. but i think message trumps all that, phil. and i have two things to say to you. number one, lower taxes and spending means more economic growth. i don't think that message got out. maybe the first debate, that was all. and number two, there was no message to immigrants. and both of those things helped sink the party. what's your thought? do you think the republican governors see this? >> yeah, larry, the republican governors clearly see this. look, i just came from las vegas, where they met. usually, what happens in vegas stays in vegas. but i'll tell you, there were a lot of good things that were happening in las vegas. the republican governors get that message, and they get that message because they actually have accomplished in their states a lot of those things, right? you have to look at the fact that there are now 30 republican governors. it was the only place in the country where we picked up additional seats. we now have generational transfer of leadership with people like bobby jindal and scott walker leading the governors association. you have new governors like mike pence, whose first form of business is a 10% cut in the personal income tax for his state. it's a pro-growth policy

measure. and i think republican governors were talking about two things -- >> all right. so you got a deep bench. you've got a deep bench. i know you've got a deep bench. i think that's going to come in handy in 2016. but mark simone, i don't even know if we've talked about this over at the radio station. but i think larry elder is right in the sense that republicans, conservatives have got to reach out, have got to reach out to the immigrant community. latinos, hiss paungz. that includes asians, baty the way. i want to turn illegal undocumented immigrants into legal documented immigrants. and i think that's a key reason why the republican party lost. >> i agree with you. there are now 30 states with republican governors. had romney won each of those states, that's 315 electoral votes. they have to modernize. it's not a case of for or against illegal immigration. it's about straightening out this mess.

romney the efficiency expert could have straight thaend out, created an orderly system where we take people in, people don't have to hide in the shadows and people can be put to work and get some sort of documentation. that's what they need to do. >> igor, let me go to you. let me go back to the economic message. romney tried to run as a free enterpriser but he didn't talk about supply side tax cuts much with the exception of the first debate, which he won nicely, and that i thought was his single best defense of free market capitalism and lower taxes and lower spending. but i think barack obama was pretty clever. he basically said blame george w. bush, which the exit polls said people did, and the economy, give me more time. romney won the economic issues, igor, but he didn't win it by that much. so i don't think the republicans got their message out. >> larry, i don't think he won the economic issue. you look at the exit polls, 60% -- >> i'm looking at the exit polls. >> and they show that 60% of voters want to increase taxes on the rich -- >> no, no, no. i'm not even going there. i'm talking about

unemployment -- >> but you look at the polls that's the economic message. the -- >> that is not -- look. romney won all the economic polling data. by the way, your 60% number is incorrect. everybody talks about that number. 60% of people didn't want a tax hike at all. what i'm saying is do you think -- just take your partisan hat off for a minute. >> it's not even on today. >> do you think that romney made the economic growth case? that's really what i'm trying to ask you. >> no. i don't think romney made any kind of strong policy case on anything. and the problem is for the republican party it's not just message. it all comes back to policy. i'll still make my point on the economy. you agree with me on immigration, that the republicans got to adjust their immigration message. >> right. >> it's a real problem for them. and the thing is that's going to i think do them in is demographics, is that the obama coalition is here to stay. women, african-americans, hispanics. and if they don't change their

position on issues that constituency cares about they're going to have a problem moving forward -- >> mark simone, i don't want two liberal parties. i don't want two liberal parties. i'm making a different case. how do you respond to igor? >> it's not like it's a changing position. the republicans don't have to start handing out condoms on every corner but i did i they should get out of that issue, leave it to the churches, to the states. and just have no position on that ever again. i think that was the biggest piece of baggage around mitt romney's neck. >> phil musser, it's interesting what mark said about the states. i remember vice president cheney taking an absolutely similar position, phil. what do you think? do you think the gop will reach out? i'm going to go right to it. the mexican, latino, hispanic -- do you think they will change? it's got to be a policy change, phil. it's got to be a policy change. >> policy change. >> it's got to be two things, larry. it's got to be policy and it's got to be tone and approach. and i can tell you the republican governors in las vegas were very clear and articulate about the fact you need to do that. i work a lot with suzanna martinez. she was very blunt and direct to

the republican party about how they need to reach out. and they will. >> thank you. igor volsky, mark simone, phil musser. that's for this evening's show. thanks for watching. come on, gop, get on the stick. economic growth, immigration. it's two sides of the same coin. bob, these projections... they're... optimistic.

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